Ukrainian crisis to have limited impact on CR´s economy - analysts

published:05.03.2014, 15:00

updated:05.03.2014 15:14

Prague - The Ukrainian crisis will probably have only limited and short-term impacts on the Czech economy as the business ties are relatively small and potential suspension of gas supplies would not affect the economy, analysts addressed by CTK said today.

However, potential EU sanctions against Russia and a subsequent growth in oil prices could pose a risk. The analysts also mentioned negative impacts on the activities of Czech companies in Ukraine and on investments if the situation in Ukraine escalated.

Business links between the Czech Republic and Ukraine are comparatively small and exports to Ukraine represent roughly one percent of Czech exports, said Komercni banka economist Marek Drimal.

"Moreover, a shortfall of all supplies to Ukraine can hardly be expected. But the EU´s potential sanctions against Russia could pose a risk for the Czech economy because the Czech Republic´s business relations with Russia are stronger," he remarked.

Moreover, if the situation escalated and economic sanctions would be imposed on Russia, oil prices would grow sharply, which would reduce economic growth and raise inflation, he noted.

"If Europe decided to impose the sanctions, Czech economic interests in Russia could be affected by problems," Drimal added.

The crisis could have an impact on business activities of individual companies, said Michal Ricar, an analyst of consulting company Bisnode.

"There are nearly 11,000 businesses with Ukrainian owners in the Czech Republic. The highest number of foreigners working in the Czech Republic are also of Ukrainian origin. A significant internal instability in Ukraine will certainly have a negative impact also on the rating of the companies with Ukrainian owners," Ricar said.

According to Bisnode´s data, 10,801 Czech companies have Ukrainian owners but individuals clearly prevail among them. There are also 38,105 Ukrainian self-employed doing business in the Czech Republic.

Some 53,000 Ukrainian entities hold a stake in Czech companies. They have subscribed to Kc2.43bn worth share capital in them. Hundreds of Czech companies have a subsidiary in Ukraine and the number of exporters to this country moves in thousands.

Navratil noted that potential halt to gas supplies from Ukraine would not affect the Czech economy.

"Thanks to the warm winter, the Czech Republic has full storage tanks with reserves for 93 days," he mentioned.

The Czech Republic would also have enough time to cover a potential shortfall from Ukraine by getting gas elsewhere, for example, from the Nord Stream gas pipeline.

Drimal believes that the situation will most likely gradually calm down. However, if the conflict gets worse, uncertainty linked with the Ukrainian crisis may raise aversion to risk on markets.

"This could affect investments and credit channels and raise costs of companies due to higher oil prices," he remarked.

On the other hand, Ricar expects a certain economic slowdown due to the growth in oil and gas prices caused by the Ukrainian crisis.

"The impacts on the European economy should not last long, it is thus a short-term shock which will fade away as the situation will be getting stabilised," he forecast.